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Marathon stock momentum, confidence flash caution

Marathon stock momentum, confidence flash caution

Published: Nov 23, 2014 5:01 a.m. ET By WallaceWitkowski Reporter Marathon: 26 days of outrunning the recent average. SAN FRANCISCO (MarketWatch) — Stock prices retain unusual momentum and investor confidence is high heading into a holiday-shortened week, but winded bulls may be ready for a rest, market observers say. With the Federal Reserve no longer adding assets to its balance sheet, stocks raced to new highs after the European Central Bank and China kicked off new stimulus measures on Friday. The Dow Jones Industrial Average DJIA, +0.51% and the S&P 500 Index SPX, +0.52% both finished the week up 0.5%, while the Nasdaq Composite Index COMP, +0.24% closed up 0.2%. MKM Partners One remarkable — and perhaps, unnerving — thing about how stocks have been climbing lately has been the consistency of the climb. On each of the past 26 trading days, the S&P 500 has closed above its 5-day moving average. That matches the longest streak of closes above the 5-day average in the past 50 years, which was set in March 1986, according to data from Jonathan Krinsky, chief market technician at MKM Partners. On Friday, the S&P 500 closed at a record 2,063.50. Its 5-day moving average is 2,051.62. “Given the seasonal trends, and the seeming need for underinvested participants to play catch-up, it seems unlikely we would see what we saw in 1998 (-8% in two weeks),” Krinsky noted. “On the other hand, there continue to be plenty of cautionary flags that suggest upside in the next week or two is unlikely to be great.” With volumes expected to taper off going into Thanksgiving week, average trading volume for November is just over 2% higher than it was this time last year, but slightly lower than this time in 2012 and 2011. Many underperforming managers are chasing alpha What’s notable about the current volume is where it’s coming from, according to Brian Belski, chief investment strategist at BMO Capital Markets. “A lot of the volume has been coming from underperforming portfolio managers chasing the market up,” Belski said. In late September, Belski increased his end-of-year target for the S&P 500 to 2,050 from 1,900. Large funds certainly aren’t faring well. In a recent note, Goldman Sachs said returns on 782 hedge funds with $2 trillion in positions averaged 1% loss on the year, compared with the S&P 500, which is up more than 12%. Even large-cap mutual funds were trailing the S&P 500 with an average 11% return, Goldman said. Barring any significant news events, expect stocks to move mostly sideways between now and the end of the year, Belski said. If rising investor euphoria indicates bearishness ahead, then investors should definitely proceed cautiously. Adjusted for inflation, stocks are already back to their bubble highs. While rising euphoria may good in the short term, it could very well be a recipe for a holiday hangover. Certainly, retailers aren’t feeling very cheery about the holidays. In the near-term, investors should exercise tactical caution, advises Tobias Levkovich, chief U.S. equity strategist at Citi, in a recent note. Levkovich points out that stocks are flirting with levels of euphoria that result in losses over the next 12 months 80% of the time. Data from the American Association of Individual Investors backs that up with levels of confidence being the most bullish in nearly four years. Still a trickle of earnings during Thanksgiving week With earnings season in the can, a few notable companies will be reporting earnings during the holiday-foreshortened week: Report Date Company/Ticker (FactSet estimate EPS / revenue) Monday, Nov. 24 Palo Alto Networks Inc. PANW, -0.10% (12 cents / $181.7 million) Trina Solar Ltd. TSL, +4.10% (14 cents / $642.3 million) Tuesday, Nov. 25 Hewlett-Packard Co. HPQ, +0.89% ($1.06 / $28.68 billion) Campbell Soup Co. CPB, +0.27% (72 cents / $2.22 billion) Hormel Foods Corp. HRL, -0.91% (64 cents / $2.52 billion) Tiffany & Co. TIF, -0.35% (77 cents / $968.7 million) TiVo Inc. TIVO, +0.47% (7 cents / $114.9 million) Analog Devices Inc. ADI, +0.94% (68 cents / $804.8 million) Wednesday, Nov. 26 Deere & Co. DE, +1.99% ($1.56 / $7.74 billion) Stock References DJIA +91.06 +0.51% SPX +10.75 +0.52% COMP +11.10 +0.24% PANW -0.11 -0.10% More News from MarketWatch Top Stories Trending Recommended 10 things your mother-in-law won’t tell you Marathon stock momentum, confidence flash caution In retirement, a big house can lead to the poor house IRS finds missing Lerner emails 10 things not to buy on Black Friday MarketWatch Partner Center Wallace Witkowski Wallace Witkowski is a MarketWatch news editor in San Francisco. Follow him on Twitter @wmwitkowski. Recommended Articles 10 things your mother-in-law won’t tell you 10 things not to buy on Black Friday In retirement, a big house can lead to the poor house We Want to Hear from You 47 comments 253 people listening Newest | Oldest Bob Willburn 20 minutes ago The poor thing has been climbing 25~30% per year for 3~4 years, it deserves a rest! That's a really steep hill to climb. In a world of 3~4% per year US GDP growth, -1~+1 European, and India-China slipping to 6% and points south, exactly how long does the irrational belief 20%+ market growth can be maintained persist? FlagShare 1LikeReply Glenn Cheswick 40 minutes ago Several metrics indicating this rally is a bit overbought... 1) The SPX MACD is about to roll-over this coming week indicating momentum is not (and cannot) be sustained. 2) The SPX is near the upper channel indicating there is serious trend-line resistance at current level. 3) The SPX 150 DMA is near peak levels prior to small )2-3%) to medium (5-7%) pullbacks. There will most likely be better entry points into this market. Y/E tax selling has probably been exhausted. January will provide a new opportunity for investors to take profits. Odds favor taking profits in frothy positions and increasing cash position. FlagShare LikeReply The_Great_Disconnected American 1 hour ago I keep a spreadsheet of daily percentages of the four major indexes. Looking at the performance since September 1st 2014,. DJI 4.40% SPX 3.09% NASDAQ 2.33% RUT 0.09% Average 2.48% Whoopee. Takes my breath away. NOT FlagShare LikeReply Jon V Doe 1 hour ago and so ? the 0.1% zionist mafia is richer than ever and America is poorer than ever now the 0.1% have more money than the bottom 90% 90% of America can not meet even their basic necessities like food and clothes FlagShare LikeReply Glenn Cheswick 38 minutes ago @The_Great_Disconnected American Still not bad returns in that period considering the UST 10 yr is only yielding about 2.3%. FlagShare LikeReply The_Great_Disconnected American 13 minutes ago @Glenn Cheswick @The_Great_Disconnected American Yes. It's just that I kind of wonder if pulling that much hair out over the last two months was worth the trouble of getting the return. I think my molars have been ground down about an eighth of an inch in the last five weeks. I guess what I'm trying to say is I'm getting too old for this sheit.


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